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The euro zone economy faces a long, uphill road to recovery and the bloc is still suffering from a crisis of confidence, European Central Bank President Mario Draghi said on Tuesday. But he added that there was no alternative to continued budget cuts.

In testimony to the European Parliament, Draghi also said the ECB’s new bond-purchase programme for troubled countries such as Spain would provide a backstop to avoid “destructive scenarios” in the euro zone.

The ECB agreed the plan last month and financial markets are now looking for any signs Spain might make a formal aid request that would trigger intervention in bond markets.

Many hope that could be the beginning of the end of the most acute phase of Europe’s debt problems. But even with the programme, Draghi said the euro zone faced tough times ahead.

“Some things have improved in the last to two or three months, but I think the road ahead is still long and it’s uphill,” Draghi told the European Parliament’s Economic and Monetary Affairs Committee.

“The crisis of confidence that has taken over the euro area in the last few months ... has improved but it’s still there.”

Eleven euro states back financial transaction tax

LUXEMBOURG/ATHENS: Eleven euro zone countries agreed on Tuesday to press ahead with a disputed tax on financial transactions designed to help pay for the cost of fixing a crisis that has rocked the single currency area.

The initiative, pushed by Germany and France but opposed by Britain, Sweden and other free-marketers, gained critical mass at a EU finance ministers’ meeting in Luxembourg, when more than the required nine states agreed to use a treaty provision to launch the tax.